Tuesday, May 19, 2009

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”

Great. Just great.

I currently use a card with a $60 annual fee in order to rack up a lot of frequent flier miles. It's been worth it over the years, as I've gotten a lot of free tickets, but it will be interesting to see how things change. I've never had the least interest in using my ATM as a debit card to make purchases, but I'll have to start if my credit card starts charging interest immediately... which would totally suck!

15 comments:

Karen
said...

If this happens, I will be so done with credit cards! I had one slash my credit line by 50% and onther raise my interest rate 10%. All because I have very good credit and pay off my balance every month or carry a very small balance!

I really don't understand their business plan. Why would you want to annoy your better customers so you can keep the slackers???

Total BS.The beauty of the credit card is delaying payment without being charged (within the grace period, of course). Why do they need to do this when they are already making TONS off the people who can't pay their balances in full?

I hardly use my CC as it is, but it will definitely not get any use if they start charging interest immediately.-Tasha

Already felt the changes with credit cards..reduced rewards, line of credit reduced. Can tolerate paying an annual fee if I had to but if they decide to start charging interest immediately then they would lose business.

Shuchong - The credit card companies are still making money off you even if you pay off your balances on time every month. That's because they charge the vendors a fee (sometimes as high as 3.5%) for every transaction you make!

Just remember that if you abandon credit cards completely that can really hurt your credit score. I'm in the same boat as everyone else here with always paying off my balance, but I want to buy an apt. and need to maintain my credit score so I will have to continue to utilize my cards at least somewhat.

“Those that manage their credit well will in some degree subsidize those that have credit problems.”

Of course. That's what he's all about. Steal from the rich and give to the poor. I'm all for legislation that gives customers a fair warning about interest rates and such, but it's not the CC companies fault that people don't pay attention to the fine print and don't manage their cards well.

I like to have a credit card as cushion, but if I'm going to start to have to pay interest from the moment I make a charge, I will open up a second checking account to use specifically for monthly purchases (with an ATM card).

If they start charging me an annual fee, I may keep one of the cards and count it as the cost of keeping a credit line open, but I will likely cancel the others.

We'll have to wait and see what happens.

In the end it will probably have the good effect of making me much more conservative with my money management and making most purchases with cash that has been saved.

Here in Australia it seems you either pay an annual fee or get charged interest immediately. Most people use EFTPOS cards a lot too which are essentially debit cards. The merchant fees on these are a lot lower than on credit cards. Some stores (e.g. Aldi) have a surcharge on credit cards.

I use my credit card for regular purchases like groceries and gas, and pay it off in full each month, but I will no longer be using my credit card on a regular basis if they start charging me interest immediately. I think they would lose a lot more in transaction fees than they would gain in interest.

Well, I love the convenience of using my credit card and the only reason we use it now is to earn miles, since between earning miles through purchases combined with flying, we have been able to get quite a few free flights. But, if they changed the card so that it wasn't worth it anymore, I would just use my debit card.

It would suck since I wouldn't have way of earning free flights though. That has saved us about $5000 over the last 4 years.

why blame obama? we have irresponsible people to thank for this! i admit my credit card has a balance month after month and we've worked our butt off to pay it down, but with student loans in the mix of things i can say paying 5x more than the minimum fee is about all we can do at the moment. i take responsibility though and pay way ahead of time, pay more than the minimum, and all my 'rewards' of cash back go back to the card. whatever they do, i still aim to get these suckers paid off by february!!

Credit Card companies can say they'll start charging responsible people to make up for irresponsible losses, but as the writer at motley fool states, those of us with good credit do have the choice to change cards or go back to debit/cash.

They need to make sure the grace period is still included in the legislation then. Some of us have to use our personal credit cards for work, and I'll be damned if I'm getting stuck with interest payments from day one that are not reimbursable to me by my company.

About Me

My name is Madame X, and I am a 40-something single woman living in New York's lower Hudson Valley. I write about how much money I make, what I spend it on, how much I save, how I budget, my home-buying experiences, my financial goals and ambitions, my thoughts on class and what it means to be rich or poor, and anything else that relates to money. (More about me here, here, and here.)If you take any of my advice, do so at your own risk as I am not really qualified to give it. If you have advice to share, please do, and many thanks!